America's Managers and Workers

Last year North American automakers built 15.8 million cars and trucks, about the same as in 2004. Production will rise to 16.8 million by 2009. Vehicle production in the U.S. has nearly doubled since the “golden age” before oil shocks and import invasions. In general, U.S. industrial production is at an all time high, despite all the worries of a hollow economy and outsourcing.

Our economy is also becoming much more stable. Since 1982, the U.S. has had only two recessions, together lasting one year and four months, with peak unemployment of 7.8% (June 1992), but the 13 years before that we suffered through four recessions lasting a total of four years with unemployment as high as 10.8%.

But if you asked people, I bet most would say that our times are very turbulent. Why?

Our economy has become much more competitive and inflation has been largely tamed. The two are related. Inflation makes it harder to differentiate products and firms. Bad managers and inefficient firms can pass along price increases and hiding their own mistakes in the rising tide. Low inflation smokes out the poor performers. They shrink or go out of business. Their places are taken by more efficient players. Very often, however, it is a complex exchange. It is easier to see 1000 layoffs in one place than 1100 new jobs spread out all over the country.

The automaker example is a good one. My report about the robustness of the American auto industry surprised those who recalled recent layoffs at GM and Ford. It is not dying but the center of gravity is moving south to newcomers with better management and ways of dealing with labor are supplementing (replacing?) the big three. Although these are foreign based firms, most of the U.S. management and almost all the workers are American. Most of the part suppliers are American and you or I can tomorrow go out and buy shares in any of the firms involved.

These firms are also paying good wages with benefits (see references) and much of the skilled work and R&D is being moved to the U.S. In fact, the U.S. generally is a beneficiary of "in sourcing" by foreign firms.

The U.S. is part of the global economy. We can't protect our prosperity by hiding behind barriers and restrictive policies. The road to the future is through American workers, American management and American infrastructure being among the best in the world. We were yesterday; we are today and we will be tomorrow. It is our way.

The U.S. has the most competitive large economy in the world. We have nothing to fear, but fear itself if it makes forget that security comes from embracing change, not hiding from it.


Fears Under Our Prosperity
Good News About American’s Auto Industry
Toyota, Honda Gain on U.S. Automakers
U.S. Industrial Production
World Competitive Index

Posted by Jack at February 26, 2006 10:29 PM
Comment #129823

The thing about that golden age is that we had less of a population driving at that point. We had less foreign competition, too. Therefore, the question is, how many cars are being produced here per capita?

In terms of foreign firms coming in and opening up factories, the question becomes how many of these firms would have done that without legislation or the threat of legislation of regulating foreign imports?

Also, how much of the overseas success can be owed to government intervention? The steel industry in Korea was aided by government help that allowed them to dump their steel on the market at incredibly low prices. China also plays dirty, as do many of our trade partners.

The question also is, why is our entire domestic auto industry falling behind like this? One or two, maybe, but the entire industry? Why are so many other industries of ours in decline?

As for government measures of economic health, just how accurate are they? Are we having low employment because fewer people are out of work, or because fewer people are drawing unemployment benefits?

I believe in the free market, but I don’t take free to mean that people can do whatever they want and get away with it. That’s not civilized, or smart. Basic ground rules have to exist, dealing with finance, product quality and safety, and the influence of large corporations over people’s lives.

The alternative is a hostile environment, where business and people find their interests at cross purposes, and little useful compromise can be made. As long as the corporate line is exclusively held to, that is what will happen.

Posted by: Stephen Daugherty at February 27, 2006 7:56 AM
Comment #129842

Stephen D. That Korea steel is junk. Its junk. American compianies do not buy that garabge. The U.S is the leader in steel production with low cost and high quality. (also they are union) China is starting to get the picture. We could just put high tarrifs on their products.

Posted by: philipz at February 27, 2006 9:30 AM
Comment #129867
But if you asked people, I bet most would say that our times are very turbulent. Why?

Because people (with the exception of economists, pundits and the like) don’t see the whole economy. They see the day to day lives of themselves, their close friends and their families. Aggregagate measures of the economy can be misleading. That’s why GDP going up, or joblessness remaining “low” (by whose standard?) can be pointless to people.

They see the times as “turbulent” if their hourly wage has barely budged in the past few years, or their health insurance premiums have gone up (and benefits gone down). They see it as bad news if the new jobs be added pay less than the old ones that were eliminated last year. They see things as not necessarily as good if the new job they can get does pay a little more per hour, but doesn’t come with as much vacation. They scratch their head at the report that says “core inflation is low” because they can’t see the logic in excluding food and energy prices from the big news report on inflation (neither can I: everybody has to pay for food and energy, so why not report the inflation rate that everybody has to live with?).

Aggregates (unemployment rates, GDP growth) do matter, but are an extremely incomplete picture of the economy.

Posted by: Steve k at February 27, 2006 11:04 AM
Comment #129901

I would not start celebrating yet.
What we have to fear is irresponsible, FOR SALE government, and bought-and-paid-for incumbent politicians that seem to be doing just about everything they can to sabotage this nation’s future and security.

All of that rosy picture paintin’ just fuels more irresponsibility and is a potential recipe for disaster.

Even if things are stable now, that doesn’t mean they will remains so, nor should we behave irresponsibly and make recovery from the next inevitable recession more painful, or possibly worse.

Posted by: d.a.n at February 27, 2006 12:45 PM
Comment #129910

The big three needs to steamline their opperations. They need to get rid of the dead weight in both management and labor that causes the inefficientcy.
One of the best ways to do this, at least with labor, is to dump the UAW and every other union. Unions have forced companies to sign contracts that don’t allow them to fire anyone that’s not doing their job. As a result these companies have to hire 3 or 4 people to get nothing done.
On the management side they just need to dump the poor managers.
Once these companies become more steamlined they can start competing more efficiently with the forgein companies.

Posted by: Ron Brown at February 27, 2006 12:52 PM
Comment #129916

Same way with education.
There used to be one administrator per N teachers.
Now N is a much smaller; too many over-paid, do nothing administrators.

Same way with the medical crisis in this country.
Too many middlemen.

This country is suffering from too many managers, and not enough workers.

The government is another perfect example of a bloated do-nothing entity, which has grown by 140,000 since 2000.

But, don’t worry. Be happy. Everything is rosy here in the rose-colored column.

Posted by: d.a.n at February 27, 2006 1:00 PM
Comment #129919

There are more jobs in government than all of manufacturing.
What’s up with that?

Government continues to grow to nightmare proporations, along with the National Debt, which is now 67% of GDP (up from 33% in 1980).

We have seen the enemy, and it is us.

Posted by: d.a.n at February 27, 2006 1:07 PM
Comment #129923

“Our economy is also becoming much more stable.”

More stable for the wealthy, less stable for everyone else.

“We have nothing to fear, but fear itself if it makes forget that security comes from embracing change, not hiding from it.”

Jack do you embrace this change, or would you prefer to hide from it?
More Americans Turn to Soup Kitchens
America’s Second Harvest Is Helping More Than 25 Million People, an 8-Percent Increase Over 2001

Some quotes from the article:

That increase in the number of people who are hungry or “food insecure” — Washington bureaucratese for “not sure where their next meal will come from” — is reflected in data collected by the U.S. Department of Agriculture as well. In 2005, it found that more than 38 million Americans lived in “hungry or food insecure” households, an increase of 5 million since 2000.
More than 35 percent of the people who are served by Second Harvest come from homes with at least one working adult, according to a study, which was conducted by Mathematica Policy Research. The social-policy research firm is based in Princeton, N.J.

Many of those hungry are children, almost 9 million, or 31 percent. An additional 3 million of the hungry are senior citizens, about 11 percent.

“Food banks are like the canary in the mine shafts. They see trends in underreported populations long before they show up in other statistics,” said Doug O’Brien, vice president for public policy and research at Second Harvest. “People access emergency-food systems because something in their household economy has gone wrong.”

In other words, their incomes are not keeping up with their cost of living. And the food budget, studies have shown, is the most flexible. It can be cut with a visit to a soup kitchen, while the mortgage, rent, gas or electric bills are less fungible.

Posted by: Adrienne at February 27, 2006 1:10 PM
Comment #129928

Good point.
The gap continues to grow.
Median incomes have been falling for over 4 years.
Foreclosures have been rising for 13 months.
And there’s the Treasury Yield curve?
Interest rates and inflation are rising.

I just don’t see what there is to celebrate.
Of course, it could be worse…and I think the government is doing just about all it can to make sure it gets that way.

Posted by: d.a.n at February 27, 2006 1:18 PM
Comment #129955


It’s true there are statistics out there that appear to show a robust economy. As well there should be, our governement is spending a half-trillion dollars and more a year (in deficit) to keep those numbers up. Foreign ownership of T-Bills and home equity lines of credit buttressing credit card debt to maintain consumer spending also helps.
The rightwing argument is that given the size of the economy and reasonable growth, this is a sustainable economic model. The problem with that argument is to many educated and informed people that rationale holds as much water as Rumsfeld’s famous “I can’t see why it would take more men to keep the peace than to win the war”
Debt fuels growth but it must be paid off. This debt is unsecured, it’s increasing total has no real end is sight, and the piper will have to be paid.

Posted by: Dave at February 27, 2006 2:31 PM
Comment #129956


Don’t you wish you were one of that 0.9% of the population who was actually benefiting from this robust economy! If you were, I doubt you’d be writing on this blog.

IMO the foreign based auto companies are doing well because they make a better product, and seem to have more production flexibility. It isn’t the UAW’s fault that the big 3 miss every new consumer trend. Remember the oil crisis of the late 70s early 80s? Japanese autos had lower gas mileage, they broke into the US market. Ford, etc are producing trucks that I’ll never have any use for, and doing it with fewer employees. Our economy looks good on paper, but those people who used to work for US ato companies aren’t buying any of those products with Walmart wages.

Posted by: Loren at February 27, 2006 2:37 PM
Comment #129997

GM’s and Ford’s slide is a lazy, bloated management problem.
Almost as bad as the bloatedU.S. government
If they had any foresight, and developed new technologies, they would now be the world leaders.
Who makes the best electric and hybrid cars now?
Another missed opportunity.
This is where the DOE could have been of some use, but lobbyists and their bought-and-paid-for incumbents ignored research into new technologies.
Now, auto dealer lots are full of huge gas guzzlers that few want to buy now, with gasoline a few months ago at $3 per gallon.
And, electricity has
jumped 40% in the last 12 months.
And, now someone in D.C. thinks a fuel tax is in order?

Posted by: d.a.n at February 27, 2006 5:20 PM
Comment #130064


Ford, GM etc screwed up. If we had granted them the protections they wanted back thirty years ago, they would be bigger and stronger but we would be driving crappier cars (probably even worse than the ones they are selling now) and since autos are such a big part of our economy, we would all be worse off.

The Japanese firms have brought innovations in management. Some American firms have learned from them and everybody should be developing new and better ways. I prefer Americans be the best. If they are not, I want them to improve. If they will not improve, they should be replaced.

American workers and American managers are still making a record number of cars and trucks. Americans can and do invest in Toyota and others. If Toyota displaces GM it won’t be the end of the world and it will probably be good for American workers and consumers.


I have been benefiting from the robust economy, as have most Americans.


Fewer recession, less unemployment, stronger economic growth to me means more overall stability. I know you have access to alternative statistics, but all I have are the ones produced by the Fed, major researchers, BLS, OECD etc.

If you read the reference, you find that instability for sectors has increased as stability for the economy has increased. This is the cause of anxiety.

We are experiencing a paradigm shift in how we make money. This did not begin under Bush. You can trace it to the breakdown of Breton Woods, oil shocks, new technologies and methods and greater U.S. exposure to the world economy. Gone are the days of lifetime employment and a pension at the end. We have exchanged stability for opportunity. We didn’t have much of a choice anyway.

Income will come from sources other than employment and your income will be more erratic. That means in good times you have to save and invest. You have to be smarter. Intelligence pays much better than it did in 1970. The downside is that some people make poor choices.

I would also point out that this trend is worldwide. If you read German, Swedish or French media, you find that they are full of talk about the need to reform. Demagogues sometimes call it “Americanization”. But they have no alternatives except to hide and beyond poor.

Our problems with entitlements and restructuring ten years out pale beside theirs. It is worldwide.

Posted by: Jack at February 27, 2006 8:30 PM
Comment #130090

Im 18 and im a janitor at my high school. I make $6.00 an hour and i invest all of it. My money is making a killing in the stock market, which is going up. Yes, a high dow does not necessarily mean the economy is doing well. But face it, it does in this case. If an 18 year old janitor is making money, why can’t you?

Like the great Jack said:
Fewer recession, less unemployment, stronger economic growth to me means more overall stability. I know you have access to alternative statistics, but all I have are the ones produced by the Fed, major researchers, BLS, OECD etc.

Posted by: CommonSense at February 27, 2006 9:40 PM
Comment #130142

The idea that “The Market” is is working on all eight pistons at a time when growth in the economy is sideays at best makes me wonder if Republicans are really interested in making money or sleeping with the latest group that will tell you hat you want to hear.

Growth in America and around the World could growth expenditailly by driving up the Economical Viabilty and Financially Independence of Our Youth. CommonSense is a good example of that; however, I wonder if he would be willing to say that he has made all this money on his own? No, education and understanding how to use the Investment Laws to build the Better World promise everyone in the 70’s is the way forward and the Republican Party is so far out in left field on this issue that all I can do is laugh as America is ready to build an Unlimited Sustainable Society.

Posted by: Henry Schlatman at February 28, 2006 5:25 AM
Comment #130168

Have you brought gas lately - or seen a doctor?
We are not finished seeing the raise in ALL products delivered by trucks - they will need to off-set their cost to deliver it.

And heaven help us should we need medicine, or to see a doctor. These days it’s probably cheaper to die that it is to get ill.

Posted by: Linda H. at February 28, 2006 9:37 AM
Comment #130175


I almost forgot - have you brought a house recently?
The new housing boom is rapidly coming to a halt.

It is again a sellers’ market - which is fine - until one realize the prices homes are listed extremely higher than they were just a year ago.

And BTW - 1000 jobs lost in a local economy is not balanced by creating 1100 jobs in another area. The community that lost 1000 jobs is still out of their jobs.

Last year North American automakers built 15.8 million cars and trucks, about the same as in 2004.

Don’t forget that it’s NOW 2006. To show a better economy one would presume that car production would have increased from the numbers made in 2004 by the year 2005, and also be increasing in 2006.

Posted by: Linda H. at February 28, 2006 10:05 AM
Comment #130210


Do you drive an “American” car? Even if you do, would you prefer to give up the choice of buying something else?

You cannnot preserve communities and jobs as if in a jar. Things change. We have the choice of adapting to change and manybe benefiting or being crushed by it. Detroit was slow to adapt. I am not blaming only unions. Management and labor were in a poisonous symbiotic relationship to make it harder to adapt.

The number of manufacturing jobs will shrink no matter what we do. Although the manufacturing sector of the U.S. economy has actually increased since 1990, there are fewer jobs because of productivity growth.

Manufacturing will eventually be like agriculture. At one time nearly everyone was employed on farms or in related industry. Now it is less than 3%, but they produce more.

Service jobs can pay as much or more and they are often more fun. Doctors, lawyers, consultants, programmers, authors, artists and entertainers are all service providers.

Posted by: Jack at February 28, 2006 12:39 PM
Comment #130253
DAN Ford, GM etc screwed up. If we had granted them the protections they wanted back thirty years ago, they would be bigger and stronger but we would be driving crappier cars (probably even worse than the ones they are selling now) and since autos are such a big part of our economy, we would all be worse off.

Yes, GM and Ford missed the boat. And, I have never advocated tax-funded bail-outs for any company, such as the airline companies that parlayed their own incompetence into billions in tax-funded handouts (by failing to secure cock-pit doors, despite numerous warnings). That is not an appropriate use of tax dollars.

Complacency (including management) all around is the problem, and continues (not just at GM and Ford, but nation-wide). There are lots of factors, but poor planning and management, and failing to invest in new technologies and innovations is a major part of the problem. Instead, CEOs and board members were more focused on their profits, bonuses, and cookin’ the books. Poor planning is especially a major part of the problem, since they have seen increased foreign competition growing for several decades. Now, who makes the best hybrids? GM kept making Yukons and Excursions, while dealer lots can’t unload them.

True, some service related jobs remain, but a lot of those service type jobs are being outsourced too.

There is no way we can compete with labor or services provided by competition that is a fraction of the cost.

The only way the U.S. is going to keep up, and avoid a long decline, is to invest in technology, research, improved education, and better government.

Do you think we’re doing a good job of that?
Sure, you’ll say “better than most countries”.
But, we can and should do better.
Otherwise, we will continue to stagnate and decline, problems will continue to grow, and real median income will continue to fall. And, we will be more unprepared than ever for the next economic downturn.

Posted by: d.a.n at February 28, 2006 1:56 PM
Comment #130254

I have always driven an American made car - in that all of them belonged to the major American companies. I realize that like many jobs, car manufacturing has been out-sourced .

I am not afraid of change, as long as it leads to process. I AM afraid of going backwards. I totally disagreed with Clinton on the NAFTA treaty, and I find myself more angry when I see that NO ONE seems to have learned from that mistake.

Service providers also serve in the fast food areas, gas stations, rest homes, etc. THESE jobs DO NOT pay well at all - and are not fun.

The port areas strike me as a good place to add some well-needed jobs - for Americans. Why doesn’t Bush or Congress open up those areas for American citizens instead of what appears to automatically looking over - seas for operation controllers?

I am not against helping to establish relationships with the rest of the world, but I DO MIND when we attempt to establish relationships with others, while ignoring our own country.

Posted by: Linda H. at February 28, 2006 1:57 PM
Comment #130266

Linda H.
No American companies bid (or bid competitively) on the port operations of six U.S. ports, which is why 30% of our ports are already operated by foreign corporations.

Perhaps, things will have to get a lot worse, before Americans will want those jobs at the the going (global) rate?

Perhaps, too many Americans want to live too high on the hog, and refuse to take jobs that don’t even pay enough to pay their bills and mortgage? And, many are building debt too.

Perhaps, America is suffering from its own complacency due to past good times?

Perhaps, what American needs is some nostalgia of the way things use to be?

That may happen before too long.

It wouldn’t be as much reason for concern if we were becoming better educated, better prepared to compete globally, more competitive in some global markets, and making more strides in technological advances. But, we are graduating fewer and fewer in science, math, and engineering. Instead, we appear to have many pressing problems, instead, growing in number and severity.

Posted by: d.a.n at February 28, 2006 2:36 PM
Comment #130275

Jack, in concrete terms, how have you benefited from this economy?

move out of your parents’ house and then see how much of your salary you’ll be able to invest.

The way I see it, the only reason I’m doing better in this economy is because my union negotiated raises from the tightwad admins, all of whom actually are making a killing in this economy.

Posted by: Loren at February 28, 2006 2:56 PM
Comment #130286

The only way I’ve done better than otherwise, is by learning new skills, and not living beyond our means, and paying off the mortgage instead of paying for the house 3 times over (30 year loans are stupid).

Education is the key, as it is for so many things.
Leadership could help, if government were not so corrupt.

People had better not depend on government or corporations, or anyone else to keep us competetive in the world. Both have already proven to care little about that (i.e. outsourcing, administratively top-heavy public eduction, etc.).

People are feeling the decline.
You’d have to be blind to not feel it (even if you are well off).

Also, does anyone here believe the government is acting responsibly to recover quickly from the next economic downturn ? It seems to me they are doing just about everything they can to fill their own pockets, and get their golden parachutes before the $#!+ hits the fan.

Posted by: d.a.n at February 28, 2006 3:18 PM
Comment #130335


I did better, as did most people.

The economy started growing again in 2003 after the setbacks of 2000 (decline began before Bush BTW).

A simple mix of index funds including 1/3 each of S&P, EAFE, and Wilshire made the following:
2003 - 36.36%
2004 - 16.28
Feb 05 until today - 18.43%

This is very good. Also home values where I live more than doubled since 2000.

Unemployment at 4.7% means my kids can find work easily. I have had the same job for a long time, so I can’t credit or blame this economy in particular.

Before we get into it, this economy is not the best of my adult life. It is probably about number four out of thirty, which is very good.

Posted by: Jack at February 28, 2006 5:31 PM
Comment #130349

i have seen the roller coaster ride of real estate, currently in my area at $405 a square ft and i am sure some areas higher i try to be a optimist,can that be sustained ? and i realize the need for a ladder in economics, i wish the bar started a little higher,but then i look at all those hard working people from all walks of life they seem happy. but then i see a lot of people who are not so fortunite and that makes me sad . anybody care to comment?

Posted by: rodney brown at February 28, 2006 7:08 PM
Comment #130361


That’s great for you. Are there any conservative experts offering free financial advice to us liberals so that we can be won over to your side, or is this another exclusive club?

There are a lot of rich people getting richer in the current economy, but 99% of Americans don’t have the membership dues to benefit from the largess you are trumpetting. Silly liberals! Here we were worrying about all the human beings on this planet, while the conservatives were getting MBAs at Columbia, ready for the democracy equivalent of armageddon.

Posted by: Loren at February 28, 2006 7:42 PM
Comment #130369


Free advice and very simple. Buy index funds of those indices I mention above. Do it regularly when the market is up and when the market is down. Don’t try to time the market.

Don’t drink, smoke to do drugs. Save some money when you can.

Half of all American households own stock either directly or through mutual funds. You should too. I would suggest mutual index funds when you start out.

You can open an account at Charles Schwab.

As people invest, they tend to be more Republican. I am not sure if that is a cause or effect, however. If you understand the free market, you are more likely to invest in stocks and more likely to be Republican.

Posted by: Jack at February 28, 2006 8:01 PM
Comment #130375

The Republicans can put the best spin on the economy that they want. However, until this Adminitration addresses the issue of a Top Heavy Economy than Profit is at a minimum. And how can the hardcore Republicans come to terms with the idea that they are going to have to Teach the Poor on how to be Wealthy? No, the Political Winds are blowing and Societal Change is drivening the political Debate as now even the Main Stream Media is questioning the Wisdom of President Bush and the Voice of Congress. IMHO, Congress will not give this a rubber stamp without the Republicans losing control of the House of Reprentitives.

In fact, a good political ploy would be to attack the Republican Party for not being the Voice of the American People and with the right political plan a political party could pull a Campaign like the one in 94 by the Republicans. The only question is could an Independent Political Party take advantage of such intrenchment by the Hardcore Democrats and Republicans.

Posted by: Henry Schlatman at February 28, 2006 8:19 PM
Comment #130400


If the market is doing so well, why are all the pension funds in such bad shape? I mean, many corporations are doing their best to default on retirement benefits to their employees. What happen to the great returns available in our robust economy?

Posted by: Loren at February 28, 2006 10:16 PM
Comment #130407

I checked with Charles Schwab about trying to invest a few extra dollars I happened to have in 2000. I found out that just to invest with them I needed $5000 dollars. Like many Americans, I don’t have $5000 dollars laying around that I can afford to lose.

I don’t drink, smoke or carouse around. I work,(salary - no over-time pay, but I average 12 hours a day), go home, make my dinner and lunch (it’s cheaper than eating fast food, as well as healthier),watch my antena based TV and read books from the library, look at the stuff on my computer,then go to sleep.

On weekends, life is much the same, however I do occasionally (maybe once a month)go out for dinner with friends, and I talk on the phone, and attend church.

The odds of my being able to save much money are negliable. I have medical bills, medicine that costs me over $450 a month , even with helath insurance, house payments, food to eat, utility bills to pay, (oh and my cat needs food as well)and a 1990 Saturn, with almost 195,000 miles, which I brought used, and paid off.) Of course gas kills me, and up keep on my car ain’t cheap.

I have put some money aside - and have a large payment on a long term health because I don’t want my children to have to care for me as I get older.

Life is not always sweet and rosy, Jack, but it certainly is easier is to handle when one has money to do it.

Why doesn’t the creation of jobs include the ports?
If the government wants to fund jobs, those seem to be good places to start.

Posted by: Linda H. at February 28, 2006 11:05 PM
Comment #130408

this would help all members of congress and executive and judicial branches of goverment who are very wealthy like most!donate their fabulous pension plans to people who lost theirs , a goverment of the people and for the people. seems like their plans are very healthy!

Posted by: rodney brown at February 28, 2006 11:08 PM
Comment #130419


I understand that not everyone has the same money. But everyone can save and invest.

Re Schwab, you mention you don’t have $5000 to lose. If you invest prudently, your chances of losing it are very small and your chances of making money over any period of more than 5 years are excellent.

If you are interesting in protecting your kids, you really need to start with a Roth IRA. Your money can grow tax free. You can withdraw your own contributions at any time without penalty.

It is a matter of leverage. It is possible that you are so poor that you can afford nothing. Sorry about that. Most Americans are not that poor. And as I mentioned more than half of all American households own stock.

As for pensions, the problem is demography. We used to have many people paying in and only a few taking out. As our country ages, the ratio falls. Some firms also underfunded or overpromised. This was unethical and maybe illegal. But it shows why you have to trust in your own resources.

BTW be careful with long term insurance. It can be a rip off. Make sure they actually will pay out for the things the probably will happen to you and that the payments are not conditional on some other event. And never buy whole life insurance in general.

And if you don’t have a health savings account get one quick as you can.

It is good that you own your home. If you can tap some of that equity to fund your HSA and Roth accounts, you will be better off.

Posted by: Jack at March 1, 2006 12:29 AM
Comment #130494


As always, you ignore the issue of sustainability.
How long can the economy run with an $8,500,000,000,000 and rising debt? $2T of that debt is now foreign owned (doubling in the last 5 years)
How long can we run with a $500,000,000,000 deficit?
As our market share of the world economy diminishes, how long can the dollar stay highly valued as it is bled out by foreign trade deficits?
How long can a consumer driven economy run with negative savings rates and the continuous outsourcing of white collar jobs?
How long can we count on foreign investment in our nations debt instruments and equity markets?
How long can we afford tax cuts for the top 0.9% (those making more than $400,000)?
How long can we afford to have median incomes dropping?

I make money in this market, I have a good net worth and income, I am economically aware and succesful. I adapt to changing circumstance. But this administrations obsession with “belief creates its own reality” is simply stupid and is decimating our nation. Unless you’re so craven that you don’t give a crap about the masses of people who can’t afford a recession, you need to be concerned.


If you still have that money a good choice is to buy “index funds”. There are many discount brokers with no minimums, I like Alternatively (personally I think a small portfolio should be more agressive) try going to the library and following a Value-Line portfolio or the S&P 5 star recommendaitons. Both approaches outperform the market and have relatively low volatility.

Posted by: Dave at March 1, 2006 10:26 AM
Comment #130517

If the economy is doing so well, and the American car companies are laying off… I don’t know… just seems a little… odd. Maybe you can explain it in a way that I can understand.

Also, companies like IBM that did not underfund or overpromise, dropping their retirement offerings to their employees?

The typical way a Republican looks at a company is if they are making money. No problem with that. Conservatives try to make Liberal sound like idiots… as if we don’t understand that concept. It is decietful and only manages to deflect the discussion. I do have a degree in business.

What Liberals look at are the associated costs and the level of profits. Does it absolutely have to be maximized to the nth degree? Do they need to worry about polluting the air, water and soil? If not, why not.

Would you justify a neighbor setting up a salvage dump in their back yard? Maybe setting up their yard for a rave? Hey, it is their property and they are just looking to maximize the value of their property. Right?

Should there be limits on business to make sure that they are good neighbors? That they are respectful of the people living next door? Or, do we allow them anything they want because it is making money for them.

Oooops. It used to be that by making money and doing these questionable things they were creating jobs. But, if it is maximizing profits for the shareholders, then it really isn’t about creating good jobs…. is it? If a company is making good profits, but figures out that by dumping health insurance and retirement benefits they can make even more money… I guess that is great.

Bush talks about how all the tax cuts and breaks are good for the economy… for who? The average salary earnings have gone down 2% after adjusting for inflation! This is while companies are doing so well? Wow!

Oh, your investment strategy? They don’t compensate you for the loss of these “benefits” so you can replace them. Sorry. I understand the concern of just setting aside a spare hundered or so. Yeah, right!

These “benefits” were never ever fringe benefits that were “given” to an employee. That is a way to disguise it to the benefit of the company so they seemed like the cared. The facts are, without these things they knew that unions stood a good chance of coming in. Plus, these “benefits” were acutally a part of their compensation that lowered their actual pay.

Some people got paid more if their spouse had insurance and they didn’t use the companies. I am not talking about the amount that the employees copaid for their coverage, but actaully more money. Which says that it isn’t “free.”

This is an important point because on issues such as national health care people seem to think that they aren’t paying for their health care because they get it from their company they work for.

So, from a purely Liberal standpoint… I will ask why your numbers are a good thing and who exactly are they benefitting?

Posted by: Darren7160 at March 1, 2006 12:05 PM
Comment #130561


I often write on this subject and I always include the same phrase. The free market means predictable free markets, choice and the rule of law. You need to enforce ordinances against hazards, contracts and ordinary business law.

The rule of thumb for law is that it applies always and everywhere. What I object to is laws meant to micro manage firms and I generally don’t care for overt redistribution based on group membership. Some redistribution is inevitable. Public schools, parks, roads in fact almost all government services are a type of redistribution since the rich pay much more for them than they get back and the poor pay less. The difference is the government makes few choices about who can use them.

All American benefited from tax cuts. The poor benefited more proportionally, i.e. a poor guy got a larger share of his income tax free, while the rich benefited more in cash terms. This is no surprise. The poorest half of the people pay almost no net Federal tax. The poorest 20% actually has a net gain because of credits. If your tax was $100 and you now pay 5% less, you gain $5. If your tax was 0 and you gain 5, 10, 100%, you tax savings is still zero. So what you say is true, but not useful.


Debt should be addressed. We spend too much money. The Feds should cut back. It is harder to address the other points. Individuals spend beyond their means. What do you propose to do about that? I think everyone should save at least 15% of his income, but people don’t. I don’t know what to do. Do you have suggestions?

Re U.S. market share, at 4% of the world population, we produce about 22% of the world GDP. As others develop, I think it is inevitable that our world market share will decline. It is not necessarily a cause for any concern. Historically, the state of Virginia’s market share declined remarkably in relation to California’s. Did that mean Virginia became poorer?

Posted by: Jack at March 1, 2006 2:05 PM
Comment #130572


It would seem then that the pension deficit is the result of corporate corruption and downsizing of the workforce. These perpetrators are the ones who have benefited the most in the corporate sphere.

Secondly, federal decisions don’t have to be subject to market forces. They are supposed to be based on democratic principles.

Posted by: Loren at March 1, 2006 2:24 PM
Comment #130579

You missed my point completely. I have never met one of the 50% Americans who have money to invest as you say. Most of the people I know are very much like me - lower middle-class. They know nothing about prudently investing because they’ve never had enough money at one time to care.

The last time I checked, one of the major problems we have in our country is debt. Whether from credit cards to illness, a vast amount of our citizens are in debt up to their necks. (As is our nation - but you already know that).

Which do you think is better - to pay your bills, or save your money? And what about all those people who are declaring bankruptcy even with the new formulas.

Personally when my ex left me in dire straights, ($80,000 in debt), and never paid me court ordered alimony or child support for our 3 children. I decided that it was more important to pay my bills, (his bills - I didn’t know he had 7 credit cards, also in my name) as well as other debts he had incurred, that I also didn’t know about.

They ended up being my responsibility because as usual he was unemployed.
I chose to pay them off because other people have to eat as well as I do, and I hate owing anyone for anything.

Now I do qualify for several cards, none of which I want because as I said I hate owing ANYONE. Now days I am a cash and carry person.

And no, I do not keep my money in the mattress!

I hope this year to actually have a little left over as all 3 of my girls are now through college (and have their Masters or Graduate level degrees)and are on their own.
I don’t think I will ever be a millionaire - I am too old for any investment to make me a fortune.

Posted by: Linda H. at March 1, 2006 2:54 PM
Comment #130580


Any financial investment decision must ultimately depend on trusting someone. An employee has more than trust, he has a contract. Government’s role is to make certain people and corporations keep up their end of any deal. Investors in the stock market have much less to trust. Brokers give advice based on commission. How many other scams have been performed on investors?

Posted by: Loren at March 1, 2006 2:54 PM
Comment #130653
D.A.N. Why doesn’t the creation of jobs include the ports? If the government wants to fund jobs, those seem to be good places to start.

The government’s primary focus should be National Security.

Do we outsource border security at the Mexico/U.S. or Canada/U.S. borders?

Do we outsource airport security for international flights into the U.S.?

Sea Port and Border security are the government’s job duty, and the government should do that.

Othewise, what do we need government for?

To enhance port, border, and airport security, it seems like a smart thing to do is a law that requires those operations (not security, government must do that) be 100% owned and operated by 100% Americans. But, we don’t have such a law, and 30% of our sea-ports are already operated by foreign corporations. So, it may be too late. However, why is it that the President of the U.S. must be a natural born citizen of the U.S. ? Why don’t we let foreigners get jobs as policemen, Congressmen, etc.?

The real issue is security, which is the government’s duty.

Operations (i.e. commerce, shipping, transport, etc.) is not a function of government.

Just security.

There are times when government may create temporary jobs, if it is an extremely important, but I’m afraid government running all operations at sea-ports, airports, and borders would make them the most inefficient on the planet.

Posted by: d.a.n at March 1, 2006 8:12 PM
Comment #130666
Dave wrote: How long can the economy run with an $8,500,000,000,000 and rising debt? $2T of that debt is now foreign owned (doubling in the last 5 years) How long can we run with a $500,000,000,000 deficit? How long can we count on foreign investment in our nations debt instruments and equity markets? How long can we afford tax cuts for the top 0.9% (those making more than $400,000)? How long can we afford to have median incomes dropping?

I can last a few more years.
Recessions for the last 46 years have been between 2 to 11 years apart.
No one knows exactly when the next economic-downturn will happen.

But, one thing we can be almost certain of is that another recession will happen, eventually.

Based on the 2 to 11 year gap, and the last recession was about 2002, the next recession would be somewhere between 2004 and 2013.
My guess is about 2009, but who knows? We might make it to 2013 or beyond?

However, you don’t have to be a genious to see that the government fiscal and moral irresponsibility is going to make the next recovery more difficult.

[] 67% National Debt to GDP (up from 33% in 1980) has never been higher since World War II .
[] $8.2 trillion National Debt (adjusted for inflation) has never been higher (true, there has been growth in GDP).
[] $40.2 trillion nation-wide debt has never been higher.
[] The size of the government has never been higher
[] Social Security ($12.8 trillion in the hole) and Medicare have never been in worse shape.
[] Poverty is growing. All wealth belonging to 1% of the U.S. population has never been higher since the Great Depression of 1929.
[] Foreign competition has never been higher (and becoming better educated too).
[] more …

But, bought-and-paid-for incumbents in D.C. really don’t care, because they are busy gettin’ theirs, and they all got golden parachutes. They won’t be the ones to suffer. They really don’t care, and the proof is in their actions.

That’s why the next recession could easily turn into the next great depression.

Posted by: d.a.n at March 1, 2006 10:04 PM
Comment #130678


You absolutely missed by point about market share,median income,and consumer driven economy. Please reread.

Posted by: Dave at March 1, 2006 10:38 PM
Comment #130754

I appreciate your response. However, I do believe that it is to the point. Perhaps because it is the typical Republican party’s ability to deflect people from the larger issues by focusing on the nickle and dimes… the petty ones.

What they want is for us to look to the person in front of us at the supermarket using food stamps. Check out their clothes, watch, shoes and products in their cart. Then try to see what kind of car they are driving. Meanwhile, the rich are socking it to us… Corruption, falsifying financial reports, bribes, huge stock options and pay packages.

$22 billion give away in a Republican only closed meeting. Our energy policy done by a secret committee chaired by our Vice-President!

Once these men swear their oath to their office they are now supposed to be beyond party… they are supposed to represent all Americans… not just those that elected them. Some Republicans believe that they are the majority (I would not call it by a mandate justifying amount) and we Democrats just need to shut up and get used to it.

This is the attitude of some and it is discouraging. One, it isn’t a winner take all proposition. Second, politics changes and parties gain and lose power… so to think that tomorrow will by like today is crazy… and will the Republicans then shut up when the Democrats are in power and take from the same playbook? It doesn’t appear so based on the outrage of the Republicans at what the Democrats are doing to their party… but we take notes and learn… if you can’t get them on substance, throw everthing at them and see what sticks. I guess many thought that once the Republicans were back in power the Democrats would do their usual make nice and play along.

Back to the financial stuff…

Say a person is in a lower income bracket… I can sympathize with Linda because I am a single parent. As a father it is often assumed that I have the money to do everything and to take care of all of their needs.

As a consumer, let’s look at the spending of a poorer person. Can that person really afford to go to a Sam’s Club and spend $10 on a large bundle of toilet paper, or paper towels, or mac and cheese? Not really… yes, we understand that buying in bulk saves us money on a per item basis… but we have a limited amount of money and cannot spend it all on a few items… so we have to buy the smaller quantities and pay more per item. We pay more but now our kids can eat hamburger instead of a ton of toilte paper. This is but a small example.

With credit cards… are the higher interest rates justified becuase of the failure of poor people to pay them off? Or, are poor people unable to pay them off because of the high interest rates?

I cannot say what your financial situation is, or if you have to deal with having $20 left a week before your next paycheck. I, for one, cannot invest that $20.

Sir, we are not talking about scum of the earth, parasites on society here. We are talking about American citizens that are working ever day, every week. Building the products and providing the services we need. We cannot simply scoff and tell them to find a better job. Don’t you think that they would? How many of these really good jobs do you think that are out there? How many of these really good jobs are disappearing?

When we talk about “redistribution” of wealth, we are not talking about storming the gates of the factory. We are talking about a mutually benefical arrangement where the shareholders earn a fair return on their investment (defining fair is difficult I know… say 3 to 5% over T-bills?), consumers get what they want or need and the workers get a fair deal concerning a living wage.

Instead, it has turned into maximizing the profits, regardless of the cost. Need to trim a bit to meet the quaterlies? Figure out how many people we can lay off and meet the numbers. Call them “excess” labor and just have everyone else pick up the slack.

It is much to simple to disregard the workers laid off as unproductive or excess. It sounds good and makes some feel better… but I have worked in manufacturing for many years and each of those people were hired to meet a need… if they didn’t then they were let go. When there were lay offs the need was still there, but the people remaining had to work harder to make the ends meet.

I believe your article was to highlight the good points of the economy. This was done by presenting the number of cars made and the presumption that 1,000 jobs lost are replaced by 1100 new jobs somewhere else. This is actually quite easy to see if you look at the unemployment and new job statistics. However, they do not tell the whole story. Like accounting for the loss of earning power after inflation.

This, to me, says that the new jobs are not paying the same wages as the old jobs… actually are paying less. Plus, the increase of pay for people still on the same jobs has not increased to keep up with that inflation.

They do not talk about the differences in pay and benefits between the new and old jobs. They do not talk about the retraining or relocation costs of the workers to the new jobs… or the ability of the laid off worker to retrain due to any number of reasons.

I do not believe that labor is the problem. What might be an issue is seeing management and executives (who are employees themselves)raking in $millions, pleading for tax breaks (getting them) and then laying off the workers, cutting their pay or contributing less to their benefits… all the while making record profits (in some instances like the companies eliminating retirement benefits).

As you mentioned about competition and eliminating the dead weight… that is why I am opposed to “supply-side” economics. This rewards all companies… the well run and the not well run. Instead, the breaks should go to the consumers and yes… let the companies carry the additional burden.

Wow, I know that this is a terrible idea!!! They will just pass the increase on to the consumer!!! Yeppers… but it will only then be paid by the consumer that uses that companies product or service.

Let the consumer decide. With the additional income they can choose which company is delivering the goods they want. The free market. This should be loved by the Republican consumer that is concerned about higher taxes and should only be hated by the corporations that cannot compete.

That, too me is how the capitalist system (private ownership) and the free market (let the consumer choose the winners and losers) should work while providing the income required by society for the goods and service it requires.

We are not naieve… we just don’t see the results of the promises made by the republican party and their tax cuts stimulating the economy.

The interesting this is… we can say that the Republican plan worked as evidenced by your description at the beginning… we can also say that it worked less than expected, better than expected or my plan would have been better/worse than what we have experienced. You just cannot know. Did my headache go away because I took the asprin or would it have gone away naturally in the same amount of time? I cannot say for 100% sure because I took the asprin.

So yes… things measured from the top can create a rosy picture, but as I have mentioned before, America doesn’t have a math and science problem… it has a problem with History, Civics and Critical Thinking.

If we don’t all dance in the streets maybe it is because we either believe that we could be doing better as a nation, or that the numbers are not represeting our experiences.

Posted by: Darren7160 at March 2, 2006 8:22 AM
Comment #130787

Darren & Loren

Some people will have a hard time. I don’t mean this to sound (or be) cruel. It is just how it has been and will be. As our standards rise, we define being poor differently. So now we assume that even poor people should have cars, go on vacations etc. I am not saying they should not. My only point is that my parents never owned a car or went anyone on vacation. They were considered lower middle class. Today such CONSUMING would be considered poverty.

Nobody likes greedy people. But it is not as simple as it sounds. When you talk about a fair return on investment, you are talking about something you can’t have. You can’t guarantee a return. If you invest in stocks, you might gain 100% on one stock and lose everything on another. Overall, you are okay. The trouble is that when you make the 100% everybody will claim you are greedy, but you have to make big gains on some to offset loses on others and the greater the risk the greater the gains you have to make on the successful ones.

Overall, stocks return about 11%. But some years you make 50% other years you lose. To make the system work, you also have to reward smart investors, which means punishing those who make mistakes. Due diligence and thoughtful investing take time. If there is no payoff nobody will spend the time.

Anyway, my bottom line is that I agree there are people having a hard time. My contention would be that there are fewer people living very poorly and if we applied our own standards of what people actually have and compared it to conditions of (say) 1955 you would have almost no poor people

Loren - getting you kids through college is a great accomplishment. It says to me that you may not have money, but you are not poor. Many rich people with no kids or ones that were not successful would envy your situation.

Again, I understand this sound mean. It is not to minimize individual suffering. But wants are unlimited and wants become needs. That means that no amount of wealth in a society will eliminate poverty since the definition is moving.

One more thing that is just an observation. I grew up in a poor neighborhood, although by no means in poverty. Some of the things that made my neighborhood good were based on being poor. We couldn’t take vacations, so we spent time in our local park. People got to know each other. We didn’t have air conditioning, so people sat on their front steps in summer, creating a feeling of community. Some of the alienation we feel is a direct result of having more stuff. Nobody I know has come up with solution to this dilemma.

Posted by: Jack at March 2, 2006 11:42 AM
Comment #130789


Sustainability! You gave no indications as to how we will survive the exsanguination of the American Dollar to foreign nationals, the reliance of our markets on the reinvestment of our money into our markets, and the complete lack of fiscal discipline of this administration via extreme debt and deficit.
All I hear is “It will be OK, don’t worry, trust me.” Remember, past performance is no guarantee of future performance. There’s a reason why that’s on a prospectus.

Posted by: Dave at March 2, 2006 12:03 PM
Comment #130793

I know that people who don’t believe in markets find this hard to take, but I rely on the markets. Having a market IS a plan, a plan that says in the face of uncertainty we will go with the flexibility of the opinions, judgments and actions of a variety of people affected by the events. Past performance is no guarantee, but markets have always worked better than central planning and there is no reason to believe it will be different in the future either.

A currency market will correct itself over time. No method of controls has been found that does a better job. Our problem with currencies is that not everyone allows market forces to work (read China). China can’t repeal the laws of supply and demand, but they can make the transitions lumpier.

We have two deficits. The Federal deficit should be addressed with budget cuts. I agree. It is harder to do than people think. The last time we had a surplus, not long ago, was because we were able to cut defense spending drastically (end of the cold war) and revenues increased so much because of the stock market bubble. That was not sustainable.

The trade deficit comes from the fact that the U.S. spends more overseas than it sells. This also has multiple causes. A big one is China, but it is also true that the U.S. economy is growing faster than most of its industrialized colleagues. This means that they sell to us, but their markets are less robust so we don’t sell as much in return. Economists expect U.S. growth to slow relative to some of our trading partners and that will help.

But do not be too concerned about investment. The trade balance equation is double entry. Foreigners are investing in the U.S. Most people think investment is good. Most countries do all they can to increase investment. If the French invest in South Carolina, we get a factory that employs Americans. They get a piece of paper. Both are important, but it is a win/win.

Posted by: Jack at March 2, 2006 12:51 PM
Comment #130797

So, Jack, in summary you think everything will work out well for US because
a) free markets are better than centrally run economies
b) Budget cuts could reduce the budget deficit
c) Trade deficits will decrease because our growth rate will decrease
d) There is foreign investment.

yeesh, that ignores so many other factors and has so many logical fallacies I’m going to give up for now.
I hope your 15% will be enough.

Posted by: Dave at March 2, 2006 1:28 PM
Comment #130892

what got us out of the great depresion? huge deficit spending. and one awful big war. what got us in the depression . they could not pay for last war we were in!

Posted by: rodney brown at March 2, 2006 8:28 PM
Comment #130912

You have to look at the big picture.
I think it is theoretically possible to avoid a repeat of history, again.
But, the voters must start doing their part soon.
Otherwise, government will simply continue to do what it does … grow more corrupt daily.
The longer voters wait, the worse it will be later.

I agree. All of the stats (i.e. the big picture) are a little too hard to ignore, and faithfully believe it will all be OK. Especially when we all know the paper money system, backed up by noting of value, is a scam, and the Federal Reserve just keeps printing more money, every year.

Somehow, we have all been programmed to believe 3 or 4 percent inflation is good? It isn’t It is one huge ponzi scheme.

Posted by: d.a.n at March 2, 2006 9:42 PM
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